Crypto Exchanges& Regulation in USA

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5 min read
Top exchanges in USA by Coincub criteria
Article review author
Jonathan Lea
USA head image

Crypto Country Rating: 7.6/10

8/10
Institutional acceptance
Many institutions looking to harness consumer demand
10/10
Exchanges & Wallets availability
Leading exchanges and one listed on stock market
7/10
Government regulation
Crypto not considered legal tender, regulation varies across states
5/10
Defi acceptance
Low acceptance
8/10
Financial services
Institutional funds looking to embrace crypto in some way
7/10
Transparency
Identification required and crypto services coming into mainstream
8/10
Spending crypto
Large corporations leading in adoption of crypto payments
8/10
Banks activity in crypto
Consumer demand driving increasing retail banking sector acceptance.

Bitcoin and cryptocurrency trading in USA

The US gets 7.6/10 for wide consumer acceptance of crypto, with the world’s leading exchange listed on Wall St. and retail banks looking to compete for services, but a disparate crypto focus from state to state.

Law and crypto trading in USA

Legal - existing crypto legislation

The good news is that investing or trading in cryptocurrencies such as bitcoin is legal and well established in the US. The gains or losses you make will have a bearing on your tax situation.

The IRS plays hardball with tax and failure to declare that you’re investing in bitcoin can leave you open to severe penalties. There are an ever-increasing number of crypto exchanges that make it easy and straightforward to buy, sell and invest in bitcoin (BTC) and other cryptocurrencies.  Most will also prepare the records of transactions you need to make your tax declarations

Legal - forthcoming crypto legislation

Legislation is constantly being reviewed and passed, mainly to do with money-laundering and taxation.

Taxing cryptocurrencies in USA

Income Tax

America’s Internal Revenue Service (IRS) identifies crypto assets as property, not currency. As a result, the tax rules that apply to dealing in other forms of property such as rare coins or stamps that can be traded for profit also apply to bitcoin and other cryptocurrencies.

There are no taxes on buying or holding cryptocurrency. However you will be taxed on any transactions you make and you’ll have to notify the IRS of your trading in the year. Tax payable varies on transactions you make in the short term and over the long term.

Tax relief

Holding bitcoins in your wallet and sitting on them, or transferring them between wallets incurs no tax, but make sure you aren’t getting confused – it’s easy to do – between transferring them, transacting them or disposing of them.

On the plus side, your losses may be deductible and can also be used to offset capital gains in a given tax year. Once again, keeping records is vital and the IRS will most certainly want an account of your activity for tax records.

Tax when moving residency

As with any income, your bitcoin will come under the tax laws of the country where you are legally resident. If you move outside the US but are still resident, make sure you have detailed transaction reports about your purchases and sales across all exchanges you used. If you set up a business to trade bitcoin, that business will come under the tax laws of the country it operates from.

Tax on mining

It’s highly technical and beyond the scope of most individuals but mining for bitcoins or any other cryptocurrency is, you guessed it, a taxable event. You can make business deductions for equipment and resources used in mining, but deductions are related to whether you are mining as a business or for personal gain. Your mined bitcoin will be valued at its fair market price and you’ll also be taxed on your transactions with it. The moral of the story? Keep records!!

Crypto financial services in USA

Fin services - retirement planning

Investing in bitcoin for retirement purposes is legal practice but generally carries high fees due to the volatility and risk involved.

Fin services - banking

A growing number of banks are able to offer crypto custody services to facilitate account holders who require it – buying crypto through bank relationships as opposed to through apps.

While many crypto services are offered to high net worth clients through investment banks, the is a growing trend aimed at granting small investors some sort of access to crypto through mainstream banks and services.

Fin Services - DeFi

DeFi is a controversial subject the world over and for the US financial system, the jury is out as to its mainstream adoption, even though many organizations appear to be investing in DeFi protocols.

Using crypto in USA

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Spend

The US is leading the way in the adoption of bitcoin and has several world brands that accept bitcoin payments including, most famously, Microsoft, Overstock, and Starbucks. In most cases, it is possible to buy vouchers with your cryptocurrency that may then be indirectly used with participating outlets.

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Gifting crypto

If you’re feeling generous, you can gift crypto up to $15,000 per recipient per year without paying taxes but if it exceeds this amount per recipient, you must make a gift tax return. You can give a gift to a recognized charity or non-profit organization free of tax and most crypto exchanges will be able to advise on gifting your cryptocurrency.

Crypto regulation in USA

Security

Blockchain technology has promoted an upsurge in cryptocurrencies and crypto trading. With returns on cash suffering from worldwide low interest, there has been huge interest in bitcoin and other digital assets/currencies as a form of investment and speculation.

Remember, as a beginner or experienced trader it pays to do some research and only deal with crypto exchanges that are established and carry insurance to protect your investment. Claiming a loss through fraud or theft is quite complex as there are so many definitions to comply with, including asset price and circumstances. You’re more likely to gain relief through a wider loss caused by a common disaster.

Transparency

Identification is required and doing your homework is always a good idea. Before trading, determine what sort of exchange and wallet you need, what fees are involved, etc. Reputable exchanges carry insurance against fraud or hacking, so in this event, you’re more likely to be claiming some form of compensation from the exchange where the system has broken down.

Helpful?
FAQ

New to crypto? Here’s our guide!

FAQ Image #1 01 Why Bitcoin? It seems like the buzz around Bitcoin just keeps growing. Bitcoin is a constantly evolving technology with a passionate community. What is it about the digital asset that makes it such a controversial topic and attractive investment?
FAQ Image #2 02 How to Get Started with Bitcoin It can be difficult to get past the technical jargon surrounding bitcoin (BTC) and other cryptocurrencies in order to figure out how you can buy and store them. Beginners can purchase Bitcoin, for example, on many exchanges using fiat currency like U.S. Dollar, Euro or British Pound.
FAQ Image #3 03 Blockchains 101 Blockchains are a type of database where data is stored in blocks that are chained together. As new data comes in, it is entered into a block, which is then chained to the previous block. The Bitcoin blockchain serves as a ledger that records every Bitcoin transaction in history.
FAQ Image #4 04 Bitcoin in the Real World Ok - you’ve found an exchange, bought your Bitcoin, and stored it safely. What’s next? By now you can buy just about anything with Bitcoin if you try hard enough, from Amazon gift cards to an old master painting. You can also convert your BTC to fiat with ATMs, an exchange, and more.